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August 2005
Feature Story

In Iowa, Pap test direct billing preserved
OIG rules out blood collection scheme
Congress urged to replace fee formula
Panel settles on genetics recommendations

In Iowa, Pap test direct billing preserved

A quick response from state pathologists and the CAP turned back an attempt to exclude Pap tests from Iowa’s recently enacted direct billing law.

Near the end of Iowa’s state legislative session this year, obstetrician-gynecologists in the state attempted to undermine the new law by securing inclusion of an obscure amendment to an end-of-session omnibus bill. The amendment would have excluded Pap tests from the direct billing law by altering the current wording to replace "including" with "excluding," with respect to Pap tests.

The Iowa Association of Pathologists, or IAP, and the CAP detected the presence of the exclusion language in Senate Amendment 3265 and, moving quickly, convinced the sponsor that the amendment would reverse the intent of the legislature and deprive women of the same economic and quality protections now afforded to other anatomic pathology patients. In a one-page fact sheet, the IAP and CAP argued that the amendment would lead to markups on Pap tests and higher health care costs for the state’s women.

"Under Medicare and Medicaid, ob-gyns are not permitted to bill patients for Pap tests performed by outside laboratories," the IAP and College wrote. "These same protections should continue to be afforded to women under the recently enacted direct billing law. Senate Amendment 3265 would reverse the clear and unanimous legislative intent to protect women from these higher costs for Pap tests that are charged by ob-gyns."

The amendment’s sponsor withdrew the exclusion language. That action represented the latest success in a campaign by the CAP and state pathology societies to enact and preserve direct billing laws. In mid-March, Iowa became the eighth state to enact a direct billing law and was followed a month later by Montana. The Iowa legislature adjourned its session on May 20.

OIG rules out blood collection scheme

A laboratory that pays blood collection fees and provides free blood drawing supplies to a client physician for Medicare patients runs the risk of violating federal anti-kickback laws.

The Department of Health and Human Services Office of Inspector General reached that conclusion in a June 6 advisory opinion issued at the request of a laboratory. Rather than send patients to the laboratory for blood draws, some referring physicians have told the laboratory they will draw specimens in their offices. The physicians have asked the laboratory to provide free blood drawing supplies and a per-patient payment for the physicians’ specimen collection services.

The OIG noted that the per-patient collection fee the laboratory would pay referring physicians could range from $3 to $6; Medicare pays $3 per patient encounter for specimen collection services.

"There is a substantial risk that the Lab would be offering the blood draw remuneration to the physicians in exchange for referrals to the Lab," the OIG wrote, pointing out that physicians could receive up to twice Medicare’s $3 collection fee plus free supplies for each patient. "Particularly when viewed in the aggregate, this compensation provides an obvious financial benefit to the referring physician, and it may be inferred that this benefit would be in exchange for referrals to the Lab"—a potential violation of the federal anti-kickback statute.

The laboratory had stated that it wished to enter into the proposed arrangement because competing labs are paying referring physicians to perform blood draws. In response, the OIG extended its admonitions beyond the subject case. "These competitor arrangements similarly may run afoul of the anti-kickback statute," it said.

In other key points, the OIG said the arrangement creates "a risk of overutilization and inappropriate higher costs to the Federal health care programs" because it gives referring physicians a financial incentive to order more tests. Also, if ordering physicians bill Medicare for the $3 collection fee in addition to collecting a fee from the laboratory, they would be "impermissibly ’double dipping,’" the OIG said.

As with all its advisory opinions, the OIG cautioned that this opinion applies only to the laboratory that requested it and is not binding.

Congress urged to replace fee formula

The College and more than 120 other national and state physician organizations have urged House and Senate lawmakers to replace Medicare’s sustainable growth rate formula for physician fee updates with a system that "appropriately reflects the costs of practicing medicine." In a July 15 letter to all House and Senate members, the groups asked lawmakers to co-sponsor the Preserving Patient Access to Physicians Act of 2005 (S. 1081, H.R. 2356), introduced in the Senate by Sens. Jon Kyl (R-Ariz.) and Debbie Stabenow (D-Mich.) and, in the House, by Reps. E. Clay Shaw (R-Fla.) and Benjamin Cardin (D-Md.).

The legislation would require positive physician fee updates in 2006. The House version would replace the sustainable growth rate, or SGR, in 2007 with a formula of the Medicare economic index less the change in physician productivity, which would yield a 2.7 percent increase next year and a 2.6 percent increase in 2006, based on current estimates. The Senate bill would require use of the alternative formula in 2006 and 2007, but revert to the SGR in 2008 and beyond.

Without congressional action, Medicare payments to physicians will fall by 4.3 percent next year and an overall 26 percent through 2011, the groups point out in their letter. "The cuts’ impact is exacerbated because other public and private payers tie their rates to Medicare rates," the groups note. "According to a recent Congressional Research Service report, current Medicare physician payment rates are already below their 2001 levels."

The CAP and other organizations used the results of a recent AMA survey to underscore their concern about reduced patient access to care. The survey showed that if the projected cuts occur, 38 percent of physicians will decrease the number of new Medicare patients they accept, 34 percent of physicians serving rural areas will discontinue rural outreach services, 54 percent will defer the purchase of information technology, and 53 percent will be less likely to participate in Medicare Advantage.

The projected cuts result from an "inherently flawed" SGR payment update formula, the groups wrote. "The SGR, which is linked to the gross domestic product, penalizes physicians and other practitioners by failing to reflect volume increases resulting from new coverage decisions and initiatives promoted by the Federal government," they said. "Only physicians are subject to arbitrary cuts due to factors beyond their control. Every other category of health care provider receives positive updates, based on a measure of inflation in their practice costs."

Panel settles on genetics recommendations

A Health and Human Services advisory group has made final recommendations consistent with CAP’s comments on appropriate coverage of genetic tests and services.

At its June 16 meeting, the Secretary’s Advisory Committee on Genetics, Health and Society, or SACGHS, agreed on final recommendations for a report, expected in the fall, on genetic test coverage and reimbursement. The College was among more than 80 individuals and organizations that commented on a draft of the report released earlier this year.

In those comments, the CAP said it generally supported the panel’s draft recommendations, including the need to ensure consistent coverage decisions and include more screening services among Medicare’s covered benefits. SACGHS maintained those positions and others in its final recommendations.

SACGHS also appears supportive of a CAP recommendation that it carefully consider, on a case-by-case basis, how genetic testing and technologies are defined. It notes that revisions to the draft report will "reframe" a discussion of genetic and genomic tests and technologies to indicate that the text is meant to be descriptive rather than definitive.

In other recommendations, the SACGHS will call on HHS to:

  • Cover preventive services, including predispositional genetic tests and services, that meet evidence standards.
  • Task a public-private group to develop principles to guide coverage decisions.
  • Assess existing evidence to determine its suitability for establishing the validity and utility of genetic tests and fund studies to fill gaps in evidence.
  • Set a threshold for the number of local coverage policies for a genetic test that would trigger a national coverage review process.
  • Allow consideration of family history to establish that a genetic test is reasonable and necessary and, therefore, covered under Medicare.
  • Pursue an "expeditious implementation" of its inherent reasonableness authority to make genetic test payment rates consistent with cost and reduce payment variations.
  • Support training and continued education of health providers in genetics and genomics.

SACGHS emphasizes that its goal of improving access to and use of genetic tests does not mean it advocates coverage of all genetic tests and services under all circumstances. "Rather, the Committee believes that genetic tests and services should be covered when there is adequate evidence to support their use," SACGHS wrote in its recommendations list. It added, "...the Committee believes that reimbursement levels for covered tests should be set at levels that do not undermine this coverage or reduce appropriate patient access."


Carl Graziano is CAP manager of government communications.